Closing the Racial Wealth Divide: A Plan to Boost Black Homeownership

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The United States is a country built on the genocide and taking of land of Indigenous peoples, as well as turning enslaved Africans into the private wealth of white citizens. This has created a nation whose riches are highly concentrated among white Americans. Even after landmark civil rights legislation in the 1960s and 1970s, the US today remains a nation mired in racial economic inequality. Indeed, if one looks at trend data, the wealth gap between white and Black Americans is widening, not narrowing.

The continued effects of structural racism can be seen in a broad range of indicators: African American unemployment is at 8.8 percent as of August 2021, compared to whites at 4.5 percent; the $38,000 median household income for African Americans is less than 60 percent of that for whites; and the poverty rate for African Americans is the second-highest for the main racial groups in the US at 21 percent, only behind Native Americans. Yet, it is in examining wealth where we see most clearly the depth and extent of racial economic inequality between Black and white Americans.

In 2019, the median wealth of African Americans, not including depreciating assets, was $9,000. By contrast, white Americans have a median wealth of $160,000. African Americans, in short, have not quite six percent of the wealth of white Americans.

For most Americans, homeownership is the most significant component of their wealth. If you look at Americans who are in the middle 60 percent of the population—that is, neither the wealthiest 20 percent nor the poorest 20 percent—homeownership represents 64 percent of gross assets. Even though only a minority of African Americans are homeowners, homeownership still comprises 49 percent of total Black assets. A research team at Demos has estimated that if Black homeownership rates were to rise to equal those of white Americans, that would boost median Black household wealth from $7,113 to $39,226, a fivefold increase.

Low rates of wealth and homeownership reinforce each other and leave Black households behind in building generational wealth. While closing the homeownership gap would reduce the racial wealth gap considerably, the Black homeownership rate has remained largely unchanged for most of the past half-century. Indeed, the gap between Black and white homeownership rates has persisted for more than 100 years, despite Black homeownership increases in the 1950s and 1960s.

Throughout the 1990s, Black homeownership rates slowly climbed. African Americans started the decade with a rate of 43 percent and ended it at 46 percent. Black homeownership rates reached a peak of 49 percent between 2004 and 2006. But once the housing bubble burst and the Great Recession hit, more than 240,000 Black homeowners lost their homes, and the Black ownership rate declined as a result.

The consistently unequal impacts of the housing crisis on African Americans widened the preexisting racial wealth divide dramatically. In the Great Recession, the wealth of all US families fell by 28.5 percent, but for Black Americans, the decline was 47.6 percent. This sharp drop in wealth for African Americans brought median wealth to a record low of $1,700 in 2013, meaning the median Black household had one percent of the median wealth of white households at that time.

More recently, the Black homeownership rate has been at about 42 percent, nearly as low as it had been decades ago. Since the Great Recession, Black homeownership has seen the most dramatic drop of any racial or ethnic group.

While Black homeownership overall has returned to the low level of 42 percent, about where it was 50 years ago, white homeownership has increased to its current rate of 72.4 percent, resulting in an ever-growing homeownership gap that leaves Black Americans behind and with little capital to invest in wealth-building opportunities.

To reverse the decline of Black homeownership and advance a more equitable economy, a focus on substantively increasing Black homeownership is necessary. In this vein, the National Community Reinvestment Coalition, where we are both from, advocates setting a goal of reaching 60 percent Black homeownership within 20 years. Based on data collected by the Urban Institute, getting to a 60 percent homeownership rate would mean 3.3 million new Black homeowning families.

This additional 3.3 million new Black homeowning households would create a total of almost 10 million Black homeowners nationwide. (For further information, see “Closing the Gaps: Building Black Wealth through Homeownership.”) To reach this level by 2040 would mean an additional 165,000 Black households (net) becoming homeowners each year. This radical increase requires a long-term commitment to new policies and practices.

Achieving 60-percent Black homeownership is no easy feat. That said, we know it is possible. How do we know it is possible? Well, for one, in 1940, before World War II, white homeownership in the US was roughly 45 percent. By 1960, it was about 65 percent. Some of the federal mechanisms that helped white families buy homes (such as GI-bill backed loans) can be imitated, we believe, to boost Black homeownership.

We suggest a combination of the following measures:

• Develop targeted programs that aim to reach those Black households best able to afford homeownership. For example, efforts that focus on African American households over the age of 40 with credit scores between 600 and 700 and a median annual household income of $40,000 to $100,000 can boost Black homeownership rates.
• Homeownership efforts should also focus on southern and midwestern states with a largely middle-income African American population. These areas—including such states as Minnesota, Georgia, and Michigan—have a considerable potential to increase Black homeownership rates nationwide.
• Programs that assist with down payments and credit repair are also much needed to help those who don’t currently qualify for a home loan but can be mortgage-ready in the future.
• A bold federal program, such as the proposed 21st Century Homestead Act, is required to rehabilitate large clusters of abandoned properties in cities with high levels of vacancies. As outlined by University of California, Irvine law professor Mehrsa Bararadan, such a program, in cities with sizable amounts of vacant property, would allow for property to be granted “to qualified residents with a condition, enforced through a forgivable lien, to hold and improve the property for 10 years,” much as the original Homestead Act offered up to 160-acre agricultural grants to (primarily) white families, contingent on making improvements to the land over a five-year period.
• Wraparound programs are also required, such as a federal jobs program that combines infusing greater income and homeownership opportunities targeted at African Americans.
• Housing reforms must also encourage federal resources to be invested to boldly address the devaluation of Black neighborhoods and enable communities to develop new homes and preserve existing affordable housing stock.
• To ensure accountability, private corporations, large banks, and government agencies should declare a long-term goal and report annually on progress toward that goal. Specifically, we recommend setting that goal as ensuring a 60-percent Black homeownership rate by 2040.

Of course, when it comes to closing the racial wealth gap, there are no silver bullets. Even as we advocate for setting an audacious goal of 60-percent Black homeownership by 2040, we are under no illusions that homeownership by itself will eliminate the racial wealth gap.

Data show that African Americans most often go into greater debt at higher interest rates for a lower-valued asset with less appreciation than white Americans, thus limiting the positive effect of Black homeownership. So, homeownership is just one part of a broader effort to eliminate the racial wealth divide. Black homeownership promotion must be part of a wider focus on wealth creation and an overall narrowing of racial economic inequality between Black Americans and their white counterparts.

A 2019 report that one of us coauthored, titled Ten Solutions to Bridge the Racial Wealth Divide, proposes a broad range of national policies and practices necessary to address the racial wealth divide and build a sustainable economy that benefits African American families. These policies include a national baby bond program, guaranteed employment, Medicare for all, higher taxes on the wealthy, reparations, and a racial wealth audit for federal policies.

Over the last 50 years, the nation has been stuck in economic apartheid in which moderate reforms have failed to reverse racial and economic inequality and indeed have supported deepening inequality. Bold policy with quantitative metrics to track progress is required.

As Bararadan noted in her report, “It is possible to invest capital in such a way as to build wealth for individuals and communities without harm to the public. Just as federal housing policies and capital investment contributed to the racial wealth gap, both can help diminish it.”

Homeownership is an essential pillar of wealth building for the African American community. To be sure, closing the racial wealth gap between white and Black Americans will require more than promoting Black homeownership. It is, however, hard to imagine closing the racial wealth gap without also ensuring that the benefits of homeownership are broadly accessible to all Americans.